After two-plus years of turbulence, the first half of 2024 brought welcome respite to investors as public and private market assets delivered positive returns with relatively low volatility. The Forge Private Market Index ended June up 5.4% for the first six months of the year despite a small pullback in the month itself, while the S&P 500 rose 3.47% in June, closing the month up 14.48% for the first half of the year. 1 2
In the private market, these returns are supported by many of the underlying metrics that Forge tracks monthly. In June, the bid/ask spread for companies traded on Forge Markets fell to its lowest level in a year, and the top 25% of companies traded at a slight premium to their primary valuation for the first time in 2024.
Along with broad index returns and supporting data, M&A and investment activity continued signaling a more positive environment. Artificial intelligence (AI) companies continued raising venture rounds in June, highlighted by Elon Musk’s xAI completing a $6 billion Series B, and French standout Mistral AI closing €600 million3 financial market data acquisitions, as BlackRock acquired Preqin for $3.2 billion and AlphaSense acquired Tegus for $930 million. 4
IPOs continued to lag in this market, as June lacked both prominent new listings and filings for upcoming potential public debuts. Halfway through the year, there have been 95 IPOs in 2024 – an improvement from 2022 and 2023, but a far cry from the five years preceding it. 5 The long-term outlook for IPOs remains strong, with names like Stripe, Databricks, Fanatics, Chime, Klarna, and Liquid Death waiting in the wings – but investors remain uncertain as to when these companies will complete the process. 6
Looking ahead, the second half of 2024 has the potential to further crystallize the outlook for investors. The elephant in the room remains interest rate cuts. Inflation cooled considerably in May,7 and while Federal Reserve Chair Jay Powell has said that the Fed needs “more confidence” before cutting interest rates, the prospect is on the table for later in the year and may provide a boost to the IPO market. 8 The looming Presidential election also has the potential to influence monetary policy, technology policy, and many other aspects that drive the market.
Regardless of what comes next, private market participants can breathe a sigh of relief as the first half of the year concludes and look forward to their customary summer vacations with relative calm.
The Forge Private Market Index dropped -0.2% in June, but still closed the quarter positively with 0.8% return in Q2 2024 and a 5.4% return YTD. For the quarter, the Forge Private Market Index lagged the S&P 500 and Nasdaq 100, both of whom were driven by mega-cap companies and their AI stories, but outperformed the Renaissance IPO Index and the Russell 2000.
AI chipmaker Cerebras, which confidentially filed for an IPO in June9 led the Forge Private Market Index in the quarter and is also the third-leading performer for the year behind xAI and Gecko Robotics.
Fanatics, Epic Games, and Flexport – three later-stage companies – were the bottom price performers in the Forge Private Market Index in Q2.
May brought a notable shift in the distribution of premiums/discounts for companies trading on the secondary market to their last primary funding round, and this continued in June. Private companies on Forge Markets traded at a median discount of -32%, nearly in line with May, and the top 10% of companies improved to a 59% premium from 47% in May.
In addition, the top 25% of companies in June traded at a 1% premium to their primary round valuation – the first time this year that this number was above 0%.
Meanwhile, the bid/ask spread for companies trading on Forge Markets fell to 6.4% -- a notable drop from May, and a one-year low overall. This suggests that investors are expressing interest in private companies at relatively close prices, improving the chances of a matched transaction.
While the private market has a number of positive signals, there are still some metrics that suggest participants are exercising caution.
It should be noted that there was a significant drop in the number of companies with sell-side indications of interest (IOIs) in June, as sellers offered shares in 171 companies, which is the lowest level since November of 2022. While a lower number of sell-side IOIs may lead to less matched transactions in the short term, it may also be a sign of growing seller confidence in their equity holdings. In particular, given that many sellers are employees of private companies, this may suggest that those employees feel more assured about their company’s long-term prospects and are less motivated to sell.
While sellers may be showing more hesitation to sell, buyers remain hungry. In June, the buy-side represented 55.2% of all IOIs on Forge Markets, largely continuing the trend since the beginning of the year. Thus far in 2024, only two months have seen more sell-side than buy-side demand.
About the Author
Dan Chaparian led Product Marketing at Forge Global. Prior to his tenure at Forge, Dan was VP, Global Product Marketing for BlackRock’s iShares ETF business. He previously held positions at Apple and Uber and a former startup founder. Read more from Dan.